This year’s Christmas shopping is expected to set new records, and a common sales trick is to combine and sell goods and services in bundles, as in ‘one item free’. Somewhat surprisingly, we often find these package deals less attractive than separate goods, according to new research from Umeå University.
The most important sales period for stores has started, and in different stores we encounter apparently good deals involving the purchase of two or more items together. Such package deals might consist of everything from ‘buy three pay for two’ to more complicated combinations, such as all-inclusive trips or computer packages with hard- and software plus warranties. In a new dissertation, Erika Knutsson, Umeå School of Business, has studied in what way the relationship between the products in the bundle affects how attractive we think the deal is. In five studies she asked nearly 800 consumers and students to determine a price for individual goods and services, and various combinations of the same products. She was surprised to see the low values placed on most bundles. “Package deals are seldom regarded as more attractive than separate products, not even if the combination is offered at a considerable discount,” says Erika Knutsson.
The relationship determines the value
Her results show that it is only bundles with closely related products that can be judges as being just as attractive individual articles. Even though she had expected that the relationship between the goods in the package would affect the estimated value, she was somewhat surprised by how important this was. “The more the bundled items are seen as belonging together, the more highly we value the combination,” says Erika Knutsson. “We’re even more satisfied with complementary bundles even if we only make use of one of the goods, compared with entirely unrelated combinations.”
Function, timing or appearance
What, then, is meant by “complementary bundles”? According to Erika Knutsson they can involve items that go together functionally, like TVs and DVD players, or goods that are consumed at the same time, like popcorn and movie tickets. It can also be a matter of products with a similar image, like bundling a round of miniature golf with a pass for a swimming facility. “What attractive combinations have in common is that customers can quickly and readily see what added value multiple products create.” Erika Knutsson maintains that this research is not only useful for companies to increase their profit margins. “More attractive bundled deals can also mean that more customers benefit from various offers.”
About the dissertation
On Friday, December 2, Erika Knutsson, School of Business, Umeå University, will publicly defend her dissertation titled Bundling for consumers? Understanding complementarity and its effect on consumers’ preferences and satisfaction. The defence will take place at 9.15 a.m. in Hs 1032, Northern Behavioural Sciences Building. The external examiner is Professor Anders Gustafsson, business studies, Karlstad University.